Correlation Between Oriental Carbon and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both Oriental Carbon and Procter Gamble at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Oriental Carbon and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oriental Carbon Chemicals and Procter Gamble Health, you can compare the effects of market volatilities on Oriental Carbon and Procter Gamble and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Oriental Carbon with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Carbon and Procter Gamble.

Diversification Opportunities for Oriental Carbon and Procter Gamble

0.13

Correlation Coefficient

Oriental Carbon  Procter Gamble

Average diversification

The 3 months correlation between Oriental and Procter is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Carbon Chemicals and Procter Gamble Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble Health and Oriental Carbon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Oriental Carbon Chemicals are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble Health has no effect on the direction of Oriental Carbon i.e., Oriental Carbon and Procter Gamble go up and down completely randomly.

Pair Corralation between Oriental Carbon and Procter Gamble

Assuming the 90 days trading horizon Oriental Carbon Chemicals is expected to under-perform the Procter Gamble. In addition to that, Oriental Carbon is 1.34 times more volatile than Procter Gamble Health. It trades about -0.06 of its total potential returns per unit of risk. Procter Gamble Health is currently generating about 0.18 per unit of volatility. If you would invest  514,665  in Procter Gamble Health on September 28, 2024 and sell it today you would earn a total of  30,250  from holding Procter Gamble Health or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Oriental Carbon Chemicals  vs.  Procter Gamble Health

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Procter Gamble Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Oriental Carbon and Procter Gamble

The main advantage of trading using opposite Oriental Carbon and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Carbon position performs unexpectedly, Procter Gamble can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Procter Gamble will offset losses from the drop in Procter Gamble's long position.

The idea behind Oriental Carbon Chemicals and Procter Gamble Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.